The dollar languished around a three-month low against the euro in early Asian trade on Monday after downbeat U.S. economic data bolstered expectations that the Federal Reserve will wait longer to raise U.S. interest rates. Industrial production fell for a fifth straight month in April and consumer confidence sagged in early May, quashing any remaining expectations that the U.S. central bank will begin raising rates as early as next month and backing the case that policymakers would hold off until September or December.
Data from the Commodity Futures Trading Commission released on Friday showed that speculators further pared back their bullish dollar bets in the week ended May 12, pushing the net long position down for the seventh straight week to their lowest in nine months. Against a basket of six major currencies, the dollar edged up about 0.2 percent to 93.230 .DXY, after posting its fifth straight weekly decline. Its longest losing streak in four years brought it as low as 92.133 last Thursday, its lowest in nearly four months.
“While the dollar is still vulnerable to some additional near-term losses, we argue on both fundamental and technical grounds, it is premature to invest as if a new bear market for the dollar has begun,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients. Expectations of divergent monetary policy remain in place in the longer term, with the Fed still poised to eventually tighten as the European Central Bank and the Bank of Japan maintain their quantitative easing policies to shore up their respective economies.
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